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    RSWM Ltd

    RSWM
    Textiles·6 Aug 2025
    Management Summary

    RSWM Ltd reported a strong turnaround in Q1 FY26, with PAT reaching ₹7 crore from a loss in the prior year, driven by a 50.6% YoY EBITDA growth and significant margin expansion. This was achieved despite a 3.2% YoY revenue decline attributed to subdued export demand and global uncertainties like the US tariffs and raw material price disadvantages. The company is strategically investing ₹92 crores in knitting capacity expansion and ₹50 crores in renewable energy to drive future growth and cost optimization.

    Highlights

    5

    • PAT of ₹7 crore compared to a loss of ₹13.7 crores in Q1 FY25, reflecting a stronger turnaround.

    • EBITDA grew 50.6% YoY to ₹81 crore, demonstrating robust operational performance.

    • EBITDA margin expanded to 6.9%, up 43 bps YoY and 63 bps QoQ, driven by cost optimizations and product mix improvement.

    • Gross profit margin strengthened to 37.3%, up 152 bps YoY and 307 bps QoQ.

    • Strategic CAPEX of ₹92 crores for knitting capacity expansion (20% increase) is expected to add ₹220 crores in annual revenue.

    Concerns

    4

    • Revenue declined 3.2% YoY to ₹1,169 crore, primarily due to subdued export demand.

    • The 25% tariff imposed by the US on textiles creates uncertainty and is seen as a strong temporary setback for the industry.

    • International polyester prices and the continued disadvantage of Indian cotton over international cotton impact competitiveness.

    • Land route disruption to Bangladesh has created issues for mélange yarn exports.

    What Changed1

    vs Q2 FY26

    Guidance items5 → 10 (+5)

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue₹1,169 Cr-3.2%YoY
    2. 02Gross Profit₹440 Cr+1.3%YoY
    3. 03Gross Profit Margin37.3%
    4. 04EBITDA₹81 Cr+50.6%YoY
    5. 05EBITDA Margin6.9%

    Segment breakdown

    Fabric (Denim & Knit)
    30,00,000 meters Denim Capacity (monthly)26,80,000 meters Denim Utilization (monthly)90% Denim Utilization Rate750 metric tons Knit Capacity (monthly)625 metric tons Knit Utilization (monthly)83.3% Knit Utilization Rate₹200 Cr Denim Revenue (Q1 FY26)12% Denim EBITDA Margin (Q1 FY26)
    List

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Capex

    ₹150 crores

    mix of internal accruals and debts

    Debt

    Gross ₹1,600 crores

    Guidance & targets

    9
    CategoryTargetPriority
    Profitability
    Next quarter performance
    same range or slightly better range
    		Medium
    Profitability
    ROI on knitting modernization
    around 18% to 20%
    		High
    Profitability
    Payback period for knitting modernization
    around five years
    		High
    Capacity
    Knitting capacity increase
    20% increase from 750 metric tons to 900 metric tons per month
    		High
    Capacity
    Green energy footprint increase
    from 74 megawatt to 124 megawatt
    		High
    Revenue
    Annual upside revenue from knitting expansion
    roughly ₹220 crores
    		High
    Revenue
    FY26 Revenue Enhancement
    not a year of revenue enhancement
    		High
    Cost
    Power cost reduction from green energy
    almost 30 paisa per unit
    		High
    Regulatory
    Jammu Kashmir unit subsidy approval
    clearance for the subsidies from the government of J&K
    		Low

    Knitting capacity expansion completion

    Next 9 months (completion), FY27 (partial revenue)
    CurrentUnderway, 9-month timeline started Q1 FY26
    TargetCompletion of project and commencement of partial revenue generation by FY27

    Why it matters

    This is a key CAPEX project expected to add ₹220 crores in annual revenue and improve product mix, crucial for future growth.

    The project is targeted to be completed over the next nine months and will be funded through a mix of internal accruals and debts.

    How to verify

    capital_allocation.capex.purposes[description='Knitting operations modernization and enhancement'].status

    Risks & concerns

    4
    RiskSeverity

    US Tariffs on Textiles

    The 25% tariff imposed by the US, an additional 5-10% higher than expected, is a strong temporary setback for the industry, though RSWM expects it to be a short-term slowdown. — Management acknowledged

    high

    Raw Material Price Competitiveness

    International polyester prices and the disadvantage of Indian cotton against international cotton continue to challenge competitiveness for Indian spinners. — Management acknowledged

    medium

    Bangladesh Export Disruption

    Closure of land routes to Bangladesh has disrupted mélange yarn exports, which typically move in smaller lots via road. — Management acknowledged

    medium

    Unprofitable Spinning Operations at Chhata

    The spinning division at Chhata was continuously bleeding money due to old and inefficient machinery, leading to a decision to cease spinning operations there. — Management acknowledged

    low

    Q&A highlights

    8

    “in case of denim, we have a capacity of 30 lakh meters of process fabric per month and against that we are clocking in this quarter an average of around 26.8 lakh meter capacity, so which works out to be almost around 90%, capacity for denim and if I share with you the knit numbers, knit number my capacity is around 750 metric ton, and we have clocked during this quarter 625 metric ton as our capacity per month for the knitted process.”

    Provides specific operational metrics for key segments, indicating healthy utilization rates for both denim and knit.

    asked by Majid Ahmaid

    2 min read5 chapters

    Detailed Narrative

    01

    Q1 FY26 Performance Overview and Profitability Turnaround

    RSWM Ltd reported a revenue of ₹1,169 crore in Q1 FY26, experiencing a 3.2% decline year-over-year, primarily due to subdued export demand. Despite this, the company achieved a significant turnaround in profitability, with PAT reaching ₹7 crore compared to a loss of ₹13.7 crores in Q1 FY25. This improvement was driven by a robust 50.6% year-over-year growth in EBITDA to ₹81 crore, and an expansion of the EBITDA margin to 6.9%, up 43 basis points year-over-year and 63 basis points quarter-over-quarter.

    02

    Strategic Investments in Knitting Capacity and Renewable Energy

    The company is making strategic capital investments totaling ₹150-200 crores for FY26. A CAPEX of ₹92 crores is allocated to modernize and enhance knitting operations, projected to increase capacity by 20% from 750 to 900 metric tons per month and add an estimated ₹220 crores in annual revenue. Additionally, ₹50 crores is being invested in renewable energy to expand the green energy footprint from 74 MW to 124 MW, aiming to reduce power costs by almost 30 paisa per unit. Both projects are targeted for completion within the next 8-9 months and will be funded through internal accruals and debt without increasing the net debt burden.

    03

    Operational Efficiency and Product Mix Optimization

    Improved gross profit margin of 37.3% (up 152 bps YoY) and EBITDA margin expansion were attributed to better cost optimizations and product mix improvements. Management emphasized a conscious effort to improve cost structure, reduce fixed costs, and enhance asset utilization. The denim segment, a key focus area, demonstrated strong performance with a 90% utilization rate (26.8 lakh meters per month) and reported a 12% EBITDA margin in Q1 FY26.

    04

    Global Textile Market Challenges and Mitigation Strategies

    The textile industry faces significant uncertainties, including a 25% tariff imposed by the US, which is seen as a strong temporary setback📎. International polyester prices and the persistent disadvantage of Indian cotton over global prices continue to challenge competitiveness. RSWM, with 70% of its revenue from India, expects limited direct impact but acknowledges indirect effects through its customers. To mitigate these, the company focuses on value-added products, certified/sustainable cotton, contamination-free yarns using imported cotton, and continuous innovation.

    05

    Debt Management and Future Growth Outlook

    RSWM's total borrowing stands at ₹1,600 crores. The company plans to fund its ongoing CAPEX through internal accruals and new debt, ensuring that new borrowings are matched by repayments to maintain debt ratios. While FY26 is viewed as a year of consolidation and optimization rather than significant revenue enhancement, the company expects revenue growth in FY27 once current expansions are fully operational. The long-term strategy includes repositioning towards high-yield segments and exploring opportunities in finished garments for a full package solution.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.